Citadel Said to Lose $35 Million on Facebook Trades

Citadel LLC, the investment firm run by Ken Griffin, lost as much as $35 million on Facebook Inc. trades in a $1 billion hedge fund, according to a person with knowledge of the matter.

The loss came in a fund whose returns are tied to the firm’s market-making business, which acts a middleman, buying and selling equities for retail brokers. The Citadel Market Making fund is little changed this month and has gained 4 percent this year, said the person, who asked not to be named because the information is private.

Devon Spurgeon, a spokeswoman for the Chicago-based firm, declined to comment on the losses, which were reported earlier Thursday by CNBC. Citadel manages $13 billion.

Facebook’s share sale last week, the biggest technology initial public offering in history, was blighted by delays and mishandled orders. Nasdaq OMX Group Inc.’s systems were overwhelmed by order updates and cancellations before the social-media company’s shares began changing hands, delaying the start of trading and preventing the exchange from immediately telling investors whether transactions went through.

Shares of Menlo Park, California-based Facebook have dropped 15 percent since the IPO.

Knight Capital Loss

Knight Capital Group Inc., a Jersey City, New Jersey-based brokerage and market maker, said yesterday that it lost as much as $35 million trading Facebook because of the technical problems at Nasdaq.

Citadel’s market-making business, called Citadel Execution Services, handles about 7 percent of U.S. listed equity-option volume and 4 percent of U.S. equity volume, according to the firm’s website.

Separately, Andrew Kolinsky, who ran the unit, is leaving next month after seven years and will be replaced by Jamil Nazarali, who joined last year, the person said.

Citadel’s biggest funds have returned 9.3 percent this year through April, said the person. Hedge funds have gained 1.7 percent this year, according to data compiled by Bloomberg.